1. 3/12/2009 Decision and Cost-Effectiveness Analysis James G. Kahn after Eran Bendavid When Rationality Falters: Limitations and Extensions of Decision Analysis

2. 3/12/2009 Decision and Cost-Effectiveness Analysis Decision & cost-effectiveness analysis: Utilitarian & rational decision-making Everyone is equally deserving Alternative (more realistic) assumptions: Behavioral economics Equity Overview

3. Mental Accounting 3/12/2009 Decision and Cost-Effectiveness Analysis You set off to buy an iPod shuffle at what you believe to be the cheapest store in your neighborhood. When you arrive, you discover that the price of the Shuffle is $75, a price you believe is consistent with low estimates of the retail price. A friend walks into the store and tells you a store 10 minutes away sells Shuffles for $55. Do you go to the other store? Now suppose you are buying a MacBook Pro for $1960, and a friend tells you it sells for $1940 in a store 10 minutes away. Do you go?

4. Normative Problem Formulation 3/12/2009 Decision and Cost-Effectiveness Analysis Classical decision theory axioms  Ordering of preference  Transitivity of preference  Quantification of judgment  Comparison of alternatives  It’s the delta that matters Cost benefit rationale “ R isky prospects are characterized by their possible outcomes and by the probabilities of these outcomes. T he same option, however, can be framed or described in different ways. ” -- Tversky & Kahneman, 1981

5. Framing Effects in Medical Decision- Making: Treatments 3/12/2009 Decision and Cost-Effectiveness Analysis When framed positively (i.e. survival vs. mortality):  Respondents 1.5 x more likely to choose surgery over other treatments (i.e. radiotherapy)  Respondents demonstrated increased preference for invasive/toxic treatments Same framing effect noted in hypothetical & real life treatment decisions Intervention use intention higher when results presented as RRR vs. ARR or NNT

6. RRR, ARR, and NNT 3/12/2009 Decision and Cost-Effectiveness Analysis RRR = Relative Risk Reduction ARR = Absolute Risk Reduction NNT = Numbers Needed to Treat DeadAlive Meds404921 CABG350974 Risk of death (from having CABG) = 350/1324 = 0.264 Relative risk of death = 0.264/0.305 = 0.87 = 87% RRR = Amt of risk of death is reduced by surgery: 100% - 87% = 13% ARR = Absolute amt of risk surgery reduces death: 30.5% - 25.4% = 4.1% NNT = # pts needing surgery to prevent 1 death: 1/ARR = 24 Source: http://www.ebm.worcestervts.co.uk/trial_results.htm

7. Role of equity 3/12/2009 Decision and Cost-Effectiveness Analysis Efficiency and Equity  Both important for health care resource allocation decisions  Few guidelines for measuring or incorporating equity  Equity ~ Values How can equity concerns be incorporated in cost- effectiveness analyses?

8. What is equity ? 3/12/2009 Decision and Cost-Effectiveness Analysis An equal and fair distribution Are treatments fairly allocated? Or Are benefits fairly distributed? No guidance on how to assess

9. Vertical Equity 3/12/2009 Decision and Cost-Effectiveness Analysis Principle of vertical equity = allocation linked to “need” Greater care is given to people with greater health needs Sicker patients  first priority for funding  Goal is to create equity in eventual health status Paying attention to equity:  Could make some relatively inefficient technologies more attractive  If benefits groups with greater claim to treatment  Or could make efficient options less attractive

10. 3/12/2009 Decision and Cost-Effectiveness Analysis Vertical equity may be controversial -- if your definition of “need” is different than mine Assume we accept vertical equity What characterizes equity? How should it measured? Controversy

11. Are All QALYs Gains Equivalent? 3/12/2009 Decision and Cost-Effectiveness Analysis 4 QALYs 0 5 10 15 20 25 00.20.40.60.81 Quality of Life Life Expectancy B A C D E 1 QALY 7 QALYs A’ B ′ E ′ C ′ D ′ Each associated with a gain of 3 QALYs!

12. Steps in Applying Equity to CEA 3/12/2009 Decision and Cost-Effectiveness Analysis 1. Define groups which could receive priority to advance equity 2. Derive equity weights 3. Determine how equity weights can be applied to results of cost- effectiveness analyses (CEA) 4. Apply equity weighting to CEA results as a form of sensitivity analysis

13. Some Possible Equity Factors 3/12/2009 Decision and Cost-Effectiveness Analysis Baseline life expectancy Baseline quality of life Improvement in or final life expectancy Improvement in or final quality of life Distribution of benefits (number of people) Health care endowment (prior expenditure) Age Personal behaviours Relation to others Social status

14. Steps in Applying Equity to CEA 3/12/2009 Decision and Cost-Effectiveness Analysis 1. Define groups which could receive priority to advance equity 2. Derive equity weights 3. Determine how equity weights can be applied to results of cost- effectiveness analyses (CEA) 4. Apply equity weighting to CEA results as a form of sensitivity analysis

15. Survey to Understand Equity 3/5/2009 MS&E 292 - Health Policy Modeling Pilot in elected officials, municipal and provincial public clerks. Participants recruited from waiting rooms at major Toronto downtown teaching hospital. Asked to imagine they were voting in a referendum between 2 programs.

16. An Example 3/12/2009 Decision and Cost-Effectiveness Analysis Attributes Scenario AB Baseline QOL30 Gain in QOL015 Baseline LE10 Gain in LE102 N10,000100 Prior Allocation50,0005,000 Age7515 Number Selecting (%) 79 (29)191 (71)

17. Significant factors in equity… 3/12/2009 Decision and Cost-Effectiveness Analysis Consistent with prioritization for those with poorer health Less prior resource allocation viewed as having priority Equal priority two groups alike except:  Had a quality of life that was 50 points worse  Had received about $13,000 less in prior resources

18. Some Factors Not Significant 3/12/2009 Decision and Cost-Effectiveness Analysis Number of people expected to benefit Potential improvement in quality of life Could have important implications for resource allocation models Distributional aspects (“how many benefit?”) may be less important than the characteristics of individuals (“who benefits?”)

19. Steps in Applying Equity to CEA 3/12/2009 Decision and Cost-Effectiveness Analysis 1. Define groups which could receive priority to advance equity 2. Derive equity weights 3. Determine how equity weights can be applied to results of cost- effectiveness analyses (CEA) 4. Apply equity weighting to CEA results as a form of sensitivity analysis

20. Equity-Weighted QALYs: eQALYs 3/12/2009 Decision and Cost-Effectiveness Analysis Vertical equity  Implies society values some health gains more than others For example  A QALY gain a sick person more valuable than a QALY gain for a well person Cancer drug vs. lifestyle drug Thus increase or decrease QALYs QALYs transformed into “eQALYs” = equity-weighted QALYs

21. Limitations of eQALYs 3/12/2009 Decision and Cost-Effectiveness Analysis QALYs already controversial Construct is artificial, somewhat foreign Measurement issues Already conflate survival, quality of life Putting equity in might confuse more than it illuminates And exacerbate concerns about subjectivity, values i.e. eQALY components:  SurvivalObjective  Quality of life (preference)Subjective  Equity weightSubjective and value-laden

22. Steps in Applying Equity to CEA 3/12/2009 Decision and Cost-Effectiveness Analysis 1. Define groups which should receive priority to advance equity 2. Derive equity weights 3. Determine how equity weights can be applied to results of cost- effectiveness analyses (CEA) 4. Apply equity weighting to CEA results as a form of sensitivity analysis